The following situations are independent: 1. Mark Installation completes a $4,000 contract, starting work on June 16, and completing the work on July 15. The home builder pays them $1,000 in advance on June 15, $2,600 on July 15, and the balance ($400) when the home is sold in September. 2. An interior designer signs a contract in December 2020 to provide design services to a home builder, related to decorating a new show home. The contract is valued at $25,000 and the designer receives a 10% down payment upon signing the contract. All design work is done during January 2021. On February 1, 2021, the show home opens to the public and the home builder pays the 90% balance remaining on the contract. 3. A lawyer has a meeting with a new client on April 15 and agrees to represent her in a legal case. The fee negotiated is to be based on the number of hours the lawyer spends on the case. At the end of the meeting, the client pays the lawyer $500 as a "retainer." The case involves research and negotiations that take place in May. On June 2, the lawyer invoices the client for $3,200 and the client pays the balance due ($2,700) in two equal instalments on June 15 and July 15. 4. On January 1 an insurance company receives $4,200 for a one-year insurance policy that will expire on December 31. Instructions For each situation, state in which month(s) the revenue will be recognized and calculate how much is recognized in each month and explain why.
The following situations are independent: 1. Mark Installation completes a $4,000 contract, starting work on June 16, and completing the work on July 15. The home builder pays them $1,000 in advance on June 15, $2,600 on July 15, and the balance ($400) when the home is sold in September. 2. An interior designer signs a contract in December 2020 to provide design services to a home builder, related to decorating a new show home. The contract is valued at $25,000 and the designer receives a 10% down payment upon signing the contract. All design work is done during January 2021. On February 1, 2021, the show home opens to the public and the home builder pays the 90% balance remaining on the contract. 3. A lawyer has a meeting with a new client on April 15 and agrees to represent her in a legal case. The fee negotiated is to be based on the number of hours the lawyer spends on the case. At the end of the meeting, the client pays the lawyer $500 as a "retainer." The case involves research and negotiations that take place in May. On June 2, the lawyer invoices the client for $3,200 and the client pays the balance due ($2,700) in two equal instalments on June 15 and July 15. 4. On January 1 an insurance company receives $4,200 for a one-year insurance policy that will expire on December 31. Instructions For each situation, state in which month(s) the revenue will be recognized and calculate how much is recognized in each month and explain why.
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 41P
Related questions
Question
Transcribed Image Text:The following situations are independent:
1. Mark Installation completes a $4,000 contract, starting work on June 16, and completing the
work on July 15. The home builder pays them $1,000 in advance on June 15, $2,600 on July 15,
and the balance ($400) when the home is sold in September.
2. An interior designer signs a contract in December 2020 to provide design services to a home
builder, related to decorating a new show home. The contract is valued at $25,000 and the
designer receives a 10% down payment upon signing the contract. All design work is done during
January 2021. On February 1, 2021, the show home opens to the public and the home builder
pays the 90% balance remaining on the contract.
3. A lawyer has a meeting with a new client on April 15 and agrees to represent her in a legal case.
The fee negotiated is to be based on the number of hours the lawyer spends on the case. At the
end of the meeting, the client pays the lawyer $500 as a "retainer." The case involves research
and negotiations that take place in May. On June 2, the lawyer invoices the client for $3,200 and
the client pays the balance due ($2,700) in two equal instalments on June 15 and July 15.
4. On January 1 an insurance company receives $4,200 for a one-year insurance policy that will
expire on December 31.
Instructions
For each situation, state in which month(s) the revenue will be recognized and calculate how much is
recognized in each month and explain why.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Individual Income Taxes
Accounting
ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning